Mr. Tim McKay reports

CANADIAN NATURAL RESOURCES LIMITED ANNOUNCES 2023 FOURTH QUARTER AND YEAR END RESULTS

Highlighting a successful 2023, Canadian Natural Resources Ltd.'s Mark Stainthorpe, chief financial officer, stated: "Through the company's effective and efficient operations, and disciplined capital allocation, we achieved our net debt level of $10-billion in Q4 2023, earlier than previously forecasted. As per our free cash flow allocation policy, we will now target to return 100 per cent of free cash flow to shareholders through dividends and share buybacks."

Tim McKay, Canadian Natural's vice-chairman, also commented: "In 2023, we delivered on our capital allocation strategy by strengthening our balance sheet, providing significant returns to shareholders and strategically developing our assets. We achieved record annual production while growing our reserves organically, on both a total proved and total proved plus probable basis, with reserve replacement ratios of 166 per cent and 194 per cent, respectively.

"Our strong execution in 2023 sets us up to continue delivering on our four pillars of capital allocation through our disciplined 2024 capital budget of approximately $5.4-billion. This budget is strategically weighted to longer-cycle thermal development in the first half of 2024 and shorter-cycle growth in the second half of the year, targeting strong exit production levels. As well, it provides us with the flexibility to adjust to changing market egress and evolving market conditions, ensuring we are allocating capital effectively and maximizing value for our shareholders.

"We are committed to supporting Canada's and Alberta's climate goals and continue to reduce our environmental footprint with our robust environmental targets, including net-zero greenhouse gas (GHG) emissions in the oil sands by 2050. We are uniquely positioned with diverse, long-life low-decline assets, which are ideal to apply technologies to reduce GHG emissions and provide industry-leading environmental performance. It is important to continue working together with the Canadian and the Alberta governments to make the Pathways Alliance a transformative industry collaboration and achieve meaningful GHG reductions in Canada. We believe Canadian energy is one of the most responsibly produced sources of energy in the world and should be the preferred energy choice."

Scott Stauth, Canadian Natural's president, also commented: "The company delivered strong operational results in 2023 and achieved multiple production records, including record annual average total production of approximately 1,332 Mboe/d [million barrels of oil equivalent per day], representing 7-per-cent production-per-share growth as a result of safe, effective and efficient operations, and significant share repurchases. We also achieved record quarterly average total production of approximately 1,419 Mboe/d in Q4 2023. With our focus on continuous improvement and process optimization, we had high reliability and utilization at our oil sands mining operations, achieving record synthetic crude oil (SCO) production of approximately 500 Mbbl/d [million barrels per day] in Q4 2023.

"One of Canadian Natural's advantages is our significant reserves base, with total proved reserves of 13.9 billion boe and total proved plus probable reserves of 18.5 billion boe as of year-end 2023, which increased 2 per cent and 3 per cent, respectively, from year-end 2022. The increase in our reserves reflects the success of our capital-efficient development opportunities across our asset base. With approximately 75 per cent of the company's total proved reserves being long-life, low-decline, the strength and depth of our assets is evident and provides us with a total proved reserves life index of 32 years, and a total proved plus probable reserves life index of 43 years."

Mr. Stainthorpe also added: "In 2023, we successfully executed on our capital program and remained focused on cost control in an inflationary environment. We delivered strong financial results in 2023, including net earnings of approximately $8.2-billion and adjusted funds flow of $15.3-billion, which drove significant returns to shareholders totalling $7.2-billion.

"In the past three years, we have reduced our net debt by over $11-billion and delivered approximately $21.5-billion directly to shareholders, through $11-billion in dividends and $10.5-billion in share repurchases. These impressive results delivered returns to shareholders of approximately $30 per share through debt reductions and shareholder distributions over the three-year time period.

"Subsequent to quarter-end, the board of directors approved a 5-per-cent increase to our quarterly dividend, to $1.05 per common share, up from the previous dividend level of $1.00 per common share, payable on April 5, 2024, to shareholders of record on March 15, 2024. This demonstrates the confidence that the board has in the sustainability of our business model, our strong balance sheet and the strength of our diverse, long-life, low-decline reserves and asset base. With this increase announced today, we have increased our quarterly dividend 24 per cent through three separate increases over the past year. This year marks the 24th consecutive year of dividend increases, with a compound annual growth rate (CAGR) of 21 per cent over that time.

"In addition, our board of directors approved a resolution to subdivide the company's common shares on a two-for-one basis, subject to shareholder approval and having obtained all regulatory approvals, including TSX [Toronto Stock Exchange] approval. The proposal will be voted on at the company's annual and special meeting of shareholders to be held on May 2, 2024.

"With our disciplined 2024 capital budget, low maintenance capital requirements and a long-life, low-decline asset base, we target to deliver strong returns on capital with robust free cash flow while continuing to provide significant returns to shareholders in 2024."

Annual highlights:

• The strength of Canadian Natural's long-life, low-decline asset base, supported by safe, effective and efficient operations, makes the company's business unique, robust and sustainable. In 2023, the company generated strong annual financial results, including:
  • Net earnings of approximately $8.2-billion and adjusted net earnings from operations of approximately $8.5-billion.
  • Cash flows from operating activities of approximately $12.4-billion.
  • Adjusted funds flow of approximately $15.3-billion.
  • Free cash flow of approximately $6.9-billion after total dividend payments of $3.9-billion, base capital expenditures of $4-billion and $500-million in abandonment expenditures.
• Canadian Natural achieved its $10-billion net debt level and, as a result, is targeting to return 100 per cent of free cash flow to shareholders, per the free cash flow allocation policy.
• The company remained disciplined in 2023, meeting its annual targeted net capital expenditures of approximately $4.9-billion and $500-million in abandonment expenditures.
• In 2023, Canadian Natural continued to focus on safe, effective and efficient operations, delivering record annual average production of 1,332,105 boe/d, an increase of 4 per cent from 2022 levels, or 7 per cent on a production-per-share basis:
  • The company delivered record annual total liquids production of 973,530 bbl/d (barrels per day) in 2023, an increase of 4 per cent or approximately 40,400 bbl/ d from 2022 levels. Strong annual liquids production in 2023 was driven by:
    • Record annual oil sands mining and upgrading production of 451,339 bbl/d, an increase of 6 per cent, or approximately 25,400 bbl/d, from 2022 levels as a result of the company's focus on continuous improvement and increased reliability.
    • The company also achieved record annual thermal production of 262,000 bbl/d, an increase of 4 per cent, or approximately 10,000 bbl/d, from 2022 levels as a result of the company's capital-efficient thermal-pad-add development program.
  • The company achieved record annual natural gas production of 2,151 MMcf/d (million-cubic-feet-per-day), an increase of 3 per cent, or approximately 61 MMcf/d, from 2022 levels, reflecting strong results from Canadian Natural's capital efficient drill-to-fill development plan.
• Canadian Natural continues to maintain a strong balance sheet and financial flexibility, ending the year with approximately $9.9-billion in net debt, with significant liquidity of approximately $6.9-billion. The company executed on a number of initiatives in 2023 to strengthen its financial flexibility, including:
  • In Q2 2023, the company extended its $2.425-billion revolving syndicated credit facility originally maturing June, 2024, to June, 2027.
  • In Q3 2023, the company extended its $500-million revolving credit facility originally maturing February, 2024, to February, 2025.
• In Q4 2023, the company repaid $405-million of 1.45 per cent medium-term notes.

Returns to shareholders:

• Returns to shareholders in 2023 were significant, having directly returned to shareholders approximately $7.2-billion, composed of $3.9-billion in dividends and $3.3-billion in share repurchases as a result of the company's ability to generate substantial free cash flow:
  • In 2023, the company repurchased a total of approximately 40.1 million common shares for cancellation at a weighted average price of $82.86 per share for a total of $3.3-billion.
• With the company's net debt below $10-billion at year-end 2023, the company is now targeting in 2024 to return 100 per cent of free cash flow to shareholders through dividends and share repurchases, per its free cash flow allocation policy. Going forward, the company will manage this allocation of free cash flow on a forward-looking annual basis, while managing working capital and cash management as required.
• Subsequent to quarter-end, the board of directors approved a 5-per-cent increase to the quarterly dividend to $1.05 per common share, up from the previous dividend level of $1.00 per common share, payable on April 5, 2024, to shareholders of record on March 15, 2024. This demonstrates the confidence that the board has in the sustainability of its business model, its strong balance sheet, and the strength of its diverse, long-life, low-decline reserves and asset base:
  • Since March 2, 2023, the company has increased its quarterly dividend 24 per cent through three separate increases, for a combined increase of 20 cents per share.
  • The company's leading record of dividend increases continues, with 2024 marking the 24th consecutive year of dividend increases with a compound annual growth rate of 21 per cent over that time.
• To date in 2024, up to and including Feb. 28, 2024, the company has returned a total of approximately $1.4-billion directly to shareholders through $1.1-billion in dividends, and $350-million from the repurchase and cancellation of approximately 4.1 million common shares.
• On Feb. 28, 2024, the board of directors approved the renewal of the company's NCIB (normal course issuer bid), which states that during the 12-month period commencing March 13, 2024, and ending March 12, 2025, the company can repurchase for cancellation up to 10 per cent of the public float (determined in accordance with the rules of the Toronto Stock Exchange), subject to TSX approval.
• On Feb. 28, 2024, Canadian Natural's board of directors approved a resolution to subdivide the company's common shares on a two-for-one basis, subject to shareholder approval and the company having obtained all regulatory approvals, including TSX approval. The proposal will be voted on at the company's annual and special meeting of shareholders to be held on May 2, 2024.

Quarterly highlights:

• In Q4 2023, the company generated strong quarterly financial results, including:
  • Net earnings of approximately $2.6-billion and adjusted net earnings from operations of approximately $2.5-billion.
  • Cash flows from operating activities of approximately $4.8-billion.
  • Adjusted funds flow of approximately $4.4-billion.
  • Free cash flow of approximately $2.5-billion after total dividend payments of $1-billion, and base capital expenditures of $800-million and $100-million in abandonment expenditures.
• Direct returns to shareholders in Q4 2023 were strong, totalling approximately $2.5-billion, composed of $1-billion of dividends, and $1.5-billion through the repurchase and cancellation of approximately 17.6 million common shares at a weighted average price of $88.26 per share.
• In Q4 2023, Canadian Natural achieved record quarterly average production volumes of 1,419,313 boe/d, an increase of 10 per cent, or approximately 125,000 boe/d, compared with Q4 2022 levels:
  • The company achieved record quarterly average liquids production volumes in Q4 2023 of 1,047,541 bbl/d, an increase of 11 per cent, or approximately 105,000 bbl/d, over Q4 2022 levels:
    • Oil sands mining and upgrading achieved record quarterly average production of 500,133 bbl/d in Q4 2023, an increase of 17 per cent from Q4 2022 levels, as a result of the company's focus on continuous improvements and increased reliability.
  • The company delivered record quarterly natural gas production volumes of 2,231 MMcf/d in Q4 2023, an increase of 5 per cent compared with Q4 2022 levels, reflecting strong results from the company's capital-efficient drill-to-fill development plan.

Reserves highlights

A key differentiator for Canadian Natural is the strength, diversity and balance of its world-class, top-tier assets. The company's total proven reserve life index (RLI) of 32 years is supported by long-life, low-decline assets that have been strategically assembled and developed over several decades. The low maintenance capital requirements relative to the size and quality of the reserves affords the company significant flexibility when balancing its four pillars of capital allocation to maximize shareholder value.

The company's reserves were evaluated and reviewed by independent qualified reserves evaluators (IQREs). The following highlights are based on the company's reserves using forecast prices and costs at Dec. 31, 2023 (all reserves values are company gross unless stated otherwise):

• Total proved reserves increased 2 per cent to 13.91 billion boe, with reserves additions and revisions of 809 million boe. Total proved plus probable reserves increased 3 per cent to 18.504 billion boe, with reserves additions and revisions of 944 million boe:
  • The strength and depth of the company's assets are evident as approximately 75 per cent of total proved reserves are long-life, low-decline reserves. This results in a total proved boe RLI of 32 years and a total proved plus probable boe RLI of 43 years:
    • Additionally, high-value, zero-decline SCO represents approximately 50 per cent of total proved reserves with a RLI of 44 years.
• Proved developed producing reserves additions and revisions are 540 million boe, replacing 2023 production by 111 per cent. The proved developed producing boe RLI is 21 years.
• Total proved reserves additions and revisions replaced 2023 production by 166 per cent. Total proved plus probable reserves additions and revisions replaced 2023 production by 194 per cent.
• In 2023, Canadian Natural continued to achieve strong finding and development costs:
  • Finding, development and acquisition (FD&A) costs, excluding changes in future development cost (FDC), are $5.86/boe for total proved reserves and $5.02/boe for total proved plus probable reserves.
  • FD&A costs, including changes in FDC, are $9.25/boe for total proved reserves and $8.28/boe for total proved plus probable reserves.
• The net present value of future net revenues, before income tax, discounted at 10 per cent, is $105.9-billion for proved developed producing reserves, $153.7-billion for total proved reserves and $186.5-billion for total proved plus probable reserves:
  • The company's total proved net asset value (NAV) per share increased to $139.07 per share in 2023 from $131.79 per share in 2022, after adjusting for asset retirement obligations and net debt. Total proved plus probable NAV per share increased to $169.65 per share in 2023 from $161.53 per share in 2022.

Corporate update

Canadian Natural is pleased to announce the appointment of Christine Healy to the board of directors of the company, effective Feb. 28, 2024. Ms. Healy is currently the president, AMEA (Asia, the Middle East and Australia) of AtkinsRealis, a globally leading design, engineering and project-management company headquartered in Montreal, Canada. Prior to that, she served as senior vice-president, carbon neutrality and continental Europe for TotalEnergies from 2021 to 2023. From 2018 to 2020, Ms. Healy served as country chair, president and chief executive officer for Total E&P Canada. Prior to her tenure with TotalEnergies, Ms. Healy was chief strategy officer and general counsel of Maersk Oil and Gas, where she was responsible for M&A (mergers and acquisitions), strategy, commercial, communications, government relations, compliance, and legal. She has also held senior executive positions with Equinor, and the government of Newfoundland and Labrador. Ms. Healy holds a BA (honours), economics, from Memorial University and a juris doctor from Osgoode Hall Law School.

As part of the company's previously announced management changes, Scott Stauth was promoted to president of Canadian Natural and joined the board of directors, effective Feb. 28, 2024. Additionally, Tim McKay, vice-chairman, has resigned from the board of directors and will continue to support the management transition until his retirement.

Operations review and capital allocation

Canadian Natural has a balanced and diverse portfolio of assets, primarily Canadian-based, with international exposure in the United Kingdom section of the North Sea and offshore Africa. Canadian Natural's production is well balanced between light crude oil, medium crude oil, primary heavy crude oil, Pelican Lake heavy crude oil, bitumen (thermal oil) and SCO (herein collectively referred to as crude oil), and natural gas and NGLs (natural gas liquids). This balance provides optionality for capital investments, maximizing value for the company's shareholders.

Underpinning this asset base is the company's long-life, low-decline production, representing approximately 73 per cent of total liquids production in 2023, the majority of which is zero-decline, high-value SCO production from the company's world-class oil sands mining and upgrading assets. The remaining balance of the company's long-life, low-decline production comes from its top-tier thermal in situ oil sands operations and Pelican Lake heavy crude oil assets. The combination of these long-life, low-decline assets, low reserves replacement costs, and effective and efficient operations, results in substantial and sustainable adjusted funds flow throughout the commodity price cycle.

In addition, Canadian Natural maintains a substantial inventory of low-capital-exposure projects within the company's conventional asset base. These projects can be executed quickly and, in the right economic conditions, provide excellent returns and maximize value for its shareholders. Supporting these projects is the company's undeveloped land base, which enables large, repeatable drilling programs that can be optimized over time. Additionally, Canadian Natural maximizes long-term value by maintaining high ownership and operatorship of its assets, and has an extensive infrastructure network, allowing the company to control the nature, timing and extent of development. Low-capital-exposure projects can be stopped or started relatively quickly depending upon success, market conditions or corporate needs.

Canadian Natural's balanced portfolio, built with both long-life, low-decline assets and low-capital-exposure assets, enables effective capital allocation, production growth and value creation.

Canadian Natural drilled a total of 284 net crude oil and natural gas producer wells in 2023, compared with 390 net wells in 2022, a decrease of 106 net wells over this time period.

Two thousand twenty-four budget strategy

Canadian Natural's unique and diversified asset base provides a key competitive advantage as it can manage the pace and timing of development activities to maximize value growth from its assets. The company reiterates its disciplined 2024 capital budget at approximately $5.4-billion, and targets to provide production growth in 2024, 2025 and beyond.

In 2024, the drilling program is strategically weighted toward longer-cycle projects, primarily thermal in situ pads, in the first half of the year, and shorter-cycle development opportunities in the second half of the year to better align with incremental market egress, maximizing value for shareholders.

North America exploration and production (E&P):

• Annual North America E&P liquids production, excluding thermal in situ, averaged 234,100 bbl/d in 2023, a 3-per-cent increase compared with 2022 levels. The increase in production from the prior periods primarily reflects growth in the company's primary heavy crude oil and liquids-rich Montney assets, partially offset by the impacts of wildfires, a third party pipeline outage and natural field declines:
  • Primary heavy crude oil production averaged 77,668 bbl/d in 2023, a 15-per-cent increase from 2022 levels, reflecting strong drilling results from the company's multilateral wells in the Mannville and Clearwater fairways. The company drilled 104 horizontal multilateral primary heavy crude oil wells in 2023:
    • Operating costs in the company's primary heavy crude oil operations averaged $19.85/bbl ($14.71 (U.S.)/bbl) in 2023, a decrease of 9 per cent from 2022 levels, primarily reflecting lower energy costs.
  • Pelican Lake production averaged 46,046 bbl/d in 2023, a decrease of 5 per cent from 2022 levels, reflecting historical low natural field declines from this long-life, low-decline asset:
    • Operating costs at Pelican Lake averaged $8.58/bbl ($6.36 (U.S.)/bbl) in 2023, an increase of 3 per cent compared with 2022 levels, primarily due to lower volumes.
  • North America light crude oil and NGLs production averaged 109,354 bbl/d in 2023, comparable with 2022 levels, reflecting strong liquids results, primarily from the Montney, which offset the impacts of wildfires, a third party pipeline outage and natural field declines:
    • Operating costs in the company's North America light crude oil and NGLs operations averaged $16.28/ bbl ($12.06 (U.S.)/bbl) in 2023, an increase of 2 per cent over 2022 levels, reflecting higher service costs.

• Canadian Natural achieved record annual North America natural gas production of 2,139 MMcf/d in 2023, an increase of 3 per cent from 2022 levels. This growth reflects strong drilling results from the company's capital-efficient drill-to-fill development plan, which was partially offset by the impacts from wildfires, a third party pipeline outage and natural field declines:
  • North America natural gas operating costs averaged $1.27/Mcf (thousand cubic feet) in 2023, a 7-per-cent increase compared with 2022 levels, primarily reflecting higher service costs. The company continues to focus on cost control, and effective and efficient operations to offset cost pressures.

• Record annual thermal in situ production levels averaged 262,000 bbl/d in 2023, an increase of 4 per cent from 2022 levels. The increase in thermal in situ production is driven by strong execution on the company's strategic development plan, including capital-efficient pad additions at Primrose and Kirby in 2023, partially offset by natural field declines:
  • Thermal in situ operating costs averaged $13.17/bbl ($9.76 (U.S.)/bbl) in 2023, a decrease of 20 per cent from 2022 levels, primarily reflecting the impact of higher production volumes and lower energy costs.
• At Jackfish and Kirby North, planned turnarounds are targeted to occur in Q2 2024, impacting quarterly average production by approximately 17,100 bbl/d.
• Canadian Natural has decades of strong capital-efficient growth opportunities on its long-life, low-decline thermal in situ assets. As outlined in the company's 2024 budget, it continues to develop these assets in a disciplined manner to deliver safe, reliable, thermal in situ production, with the following opportunities:
  • At Primrose, the company is currently drilling the first of two CSS pads, which are targeted to come on production in Q2 2025, and one SAGD (steam-assisted gravity drainage) pad at Wolf Lake, which is targeted to come on production in Q1 2025.
  • At Kirby, two of the four previously drilled SAGD pads have reached full production capacities, with the two remaining pads targeted to ramp up to their full production capacities in mid-2024.
  • At Jackfish, two SAGD pads that were drilled in 2023 are targeted to ramp up to their full production capacities in Q3 2024 and Q4 2024, supporting continued high utilization rates at the Jackfish facilities. The company is targeting to drill one SAGD pad at Jackfish in the second half of 2024, with production from this pad targeted to come on in Q3 2025.
• Canadian Natural has been piloting solvent-enhanced oil recovery technology on certain thermal in situ assets, with an objective to increase bitumen production while reducing the steam-to-oil ratio (SOR) and GHG intensities by 40 per cent to 50 per cent, and optimizing solvent recovery. This technology has the potential for application throughout the company's extensive thermal in situ asset base:
  • At Kirby North, the commercial-scale solvent SAGD pad development is approximately 80 per cent complete and the company is targeting to begin solvent injection in mid-2024.
  • At Primrose, the company is continuing to use its solvent enhanced oil recovery pilot in the steam flood area to optimize solvent efficiency and to further evaluate the commercial development opportunity.

North America oil sands mining and upgrading:

• Canadian Natural achieved record annual production of 451,339 bbl/d of high-value SCO in 2023, an increase of 6 per cent or approximately 25,400 bbl/d from 2022 levels. This increase is driven by the company's focus on continuous improvement and increased reliability through safe, reliable, effective and efficient operations from its world-class oil sands mining and upgrading assets:
  • Oil sands mining and upgrading operating costs are top-tier, averaging $24.32/bbl ($18.02 (U.S.)/bbl) in 2023, a decrease of 7 per cent from 2022 levels, primarily reflecting higher production volumes and lower energy costs.
• The company's high-value SCO, representing approximately 46 per cent of the company's total liquids volumes, captured an average price premium to WTI (West Texas Intermediate) of $2.03 (U.S.)/bbl and strong annual realized SCO pricing of $100.06/bbl in 2023, generating significant free cash flow for the company.
• As previously announced with the 2024 budget, the company is targeting turnarounds at its oil sands mining and upgrading operations:
  • At the Athabasca oil sands project (AOSP), there are two turnarounds planned at non-operated Scotford Upgrader, where it will operate at reduced rates:
    • The first turnaround was originally targeted for 10 days in April, 2024. It has now been moved into March, 2024, for a duration of 17 days, which includes additional scope and is targeted to impact Q1 2024 quarterly average production by approximately 10,000 bbl/d, the same volume as originally budgeted in Q2 2024.
    • The second turnaround is targeted to begin in September, 2024, for a duration of 49 days, as previously announced.
    • The total combined targeted annual impact to production remains unchanged from the budget at approximately 12,400 bbl/d.
  • At Horizon, a planned turnaround is targeted to occur in Q2 2024, with a full plant outage targeted for approximately 30 days, impacting quarterly average production by approximately 89,000 bbl/d.
• The company continues to pursue opportunities to increase production at both Horizon and at AOSP:
  • At Horizon, the company targets to complete the remaining components and tie-ins related to the reliability enhancement project during the planned turnaround in Q2 2024:
    • This project targets to increase capacity of the zero-decline, high-value SCO production at Horizon over a two-year time frame by shifting the planned turnarounds to once every two years from the current annual cycle, reducing downtime and increasing overall reliability. In 2025, annual production at Horizon is targeted to increase by approximately 28,000 bbl/d, with the two-year average annual SCO capacity targeted to increase by approximately 14,000 bbl/d.
  • At the Scotford upgrader, during the 49-day turnaround in Q4 2024, a debottlenecking project will be completed which targets to add incremental capacity at AOSP of approximately 5,600 bbl/d net to Canadian Natural.
  • At Horizon, the company is progressing its naphtha recovery unit tailings treatment (NRUTT) project that targets incremental production of approximately 6,300 bbl/d of SCO following mechanical completion in Q3 2027. This project is targeted to reduce GHG emissions, equivalent to 6 per cent of Horizon's total Scope 1 emissions, and will result in lower reclamation costs over the life of the Horizon project.

International exploration and production:

• International E&P crude oil production volumes averaged 26,091 bbl/d in 2023, a decrease of 4 per cent from 2022 levels, reflecting natural field declines.

Marketing:

• Canadian Natural has a balanced and diverse product mix of natural gas, NGLs, heavy crude oil, light crude oil, bitumen and SCO.
• WTI prices in 2023 were down 18 per cent compared with 2022, reflecting concerns of higher non-OPEC (Organization of the Petroleum Exporting Countries) supply and lower than anticipated global crude oil demand, as a result of persistent inflation and the resulting increase in interest rates. Crude oil prices remain volatile as the global crude oil market continues to be impacted by heightened geopolitical tensions.
• SCO benchmark pricing averaged $79.64 (U.S.)/bbl in 2023, representing a $2.03 (U.S.)/bbl price premium to WTI in 2023, compared with a $4.43 (U.S.)/bbl price premium to WTI in 2022. SCO has traded at a premium to WTI in recent years as a result of strong North American demand for refined products, however, the lower price premium in 2023 relative to 2022 was driven by increased production and egress constraints in the Western Canadian Sedimentary Basin (WCSB), particularly in Q4 2023.
• The WCS differential to WTI was $18.62 (U.S.)/bbl in 2023, comparable with $18.26 (U.S.)/bbl in 2022. As a percentage of WTI, the WCS differential widened to 24 per cent in 2023 from 19 per cent in 2022, primarily as a result of increased production and egress constraints in the WCSB.
• The North West Redwater (NWR) refinery primarily utilizes bitumen as feedstock, with production of ultralow-sulphur diesel and other refined products averaging 81,525 bbl/d in 2023.
• Natural gas prices decreased in 2023, with AECO (Alberta Energy Company) averaging $2.77/GJ (gigajoule) in 2023 compared with $5.28/GJ in 2022, reflecting lower NYMEX (New York Mercantile Exchange) benchmark pricing, increased production in the WCSB and lower storage draws due to decreased demand resulting from mild winter weather in 2023:
  • As a result of the company's diversified sale points, average natural gas realized pricing of $3.10/Mcf was achieved in 2023, which was 15 per cent above the average AECO benchmark price, maximizing value for shareholders. Approximately 26 per cent of the company's natural gas production was sold at AECO/Station 2 pricing, and approximately 37 per cent was exported to other North American and international markets, capturing higher natural gas prices. Additionally, the company used the equivalent of approximately 37 per cent of its natural gas production in its operations in 2023.
• Canadian Natural has been a supporter of incremental pipeline projects to ensure Canadian crude oil and natural gas can access global markets, to deliver the most responsible and leading ESG (environmental, social and governance) production that the world needs:
  • Canadian Natural has committed 94,000 bbl/d on Trans Mountain Corp.'s 590,000 bbl/d Trans Mountain expansion project (TMX):
    • TMX is approximately 98 per cent complete and is targeting to be in service in Q2 2024.

Financial review:

• Canadian Natural's financial positions remains strong, given its proven strategies, including its disciplined approach to capital allocation. The company's adjusted funds flow generation, credit facilities, United States commercial paper program, access to capital markets, diverse asset base and flexible capital expenditure program all support a strong financial position, and provide the appropriate financial resources for the near, mid and long term.
• The company's safe, effective and efficient operations, combined with a high-quality, long-life, low-decline asset base generated annual free cash flow of approximately $6.9-billion in 2023, after dividend payments of $3.9-billion and base capital expenditures of $4.5-billion (excluding net acquisitions and strategic growth capital of $900-million, as per the company's free cash flow allocation policy in 2023).
• In 2023, the company directly returned to shareholders approximately $7.2-billion through $3.9-billion in dividends, and $3.3-billion through the repurchase and cancellation of approximately 40.1 million common shares:
  • In Q4 2023, returns to shareholders were strong, totalling approximately $2.5-billion, composed of $1-billion of dividends, and $1.5-billion through the repurchase and cancellation of approximately 17.6 million common shares at a weighted average price of $88.26 per share.
• Canadian Natural continues to maintain a strong balance sheet and financial flexibility, with net debt of approximately $9.9-billion and significant liquidity of approximately $6.9-billion at the end of 2023:
  • Undrawn revolving bank credit facilities totalling approximately $5.5-billion were available at Dec. 31, 2023. Including cash and cash equivalents, and short-term investments, the company had significant liquidity of approximately $6.9-billion. At Dec. 31, 2023, the company had no commercial paper drawn under its commercial paper program, and reserves capacity under its revolving bank credit facilities for amounts outstanding under this program.
  • In Q2 2023, the company extended its $2.425-billion revolving syndicated credit facility originally maturing June, 2024, to June, 2027.
  • In Q3 2023, the company extended its $500-million revolving credit facility originally maturing February, 2024, to February, 2025.
  • In Q4 2023, the company repaid $405-million of 1.45 per cent medium-term notes.
• With the company's net debt below $10-billion at year-end 2023, the company is now targeting in 2024 to return 100 per cent of free cash flow to shareholders through dividends and share repurchases, per its free cash flow allocation policy. Going forward, the company will manage this allocation of free cash flow on a forward-looking annual basis, while managing working capital and cash management as required.

Environmental, social and governance highlights

Canada and Canadian Natural are well positioned to deliver affordable, reliable, safe and responsibly produced energy that the world needs, through leading ESG performance. Canadian Natural's diverse portfolio is supported by a large amount of long-life, low-decline assets which have low-risk, high-value reserves that require low maintenance capital. This allows the company to remain flexible with its capital allocation, and creates an ideal opportunity to pilot and apply technologies for GHG emissions reductions. Canadian Natural continues to invest in a range of technologies to reduce emissions, such as solvents for enhanced recovery, and carbon capture, utilization and storage (CCUS) projects. Canadian Natural's culture of continuous improvement provides a significant advantage to delivering on its strategy of investing in GHG technologies across its assets, including opportunities for methane emissions reduction, which will enhance the company's environmental performance and long-term sustainability.

Environmental targets

Canadian Natural is committed to reducing its environmental footprint and, as previously announced, has committed to the following environmental targets:

• 40-per-cent reduction in corporate Scope 1 and Scope 2 absolute GHG emissions by 2035, from a 2020 baseline;
• 50-per-cent reduction in North America E&P (including thermal in situ) methane emissions by 2030, from a 2016 baseline;
• 40-per-cent reduction in thermal in situ fresh water usage intensity by 2026, from a 2017 baseline;
• 40-per-cent reduction in mining fresh river water usage intensity by 2026, from a 2017 baseline.

Canadian Natural has a defined pathway to achieve long-term emissions reductions with an integrated GHG emissions management strategy that includes continuing investments in technology and innovation, while transferring technology across the company. The areas of focus include, but are not limited to: carbon capture, sequestration/storage and utilization, the use of solvents, energy/steam efficiencies, methane reduction, and tailings and water management.

Pathways Alliance

The six major oil sands companies in the Pathways Alliance, including Canadian Natural, operate approximately 95 per cent of Canada's oil sands production. The goal of this unique alliance is to work together with governments to achieve net-zero emissions from oil sands operations by 2050, support Canada in meeting its climate commitments and be the preferred source of crude oil globally. Pathways has a defined plan, including its foundational carbon capture and storage (CCS) project involving a CO2 (carbon dioxide) transportation line connecting Fort McMurray and Cold Lake to a carbon sequestration hub. The proposed carbon storage hub would be one of the world's largest carbon capture and storage projects, and would be connected to a transportation line that would initially gather captured CO2 from oil sands facilities in the Fort McMurray, Christina Lake and Cold Lake regions. Future phases of the plan have the potential to grow the transportation network to include over 20 oil sands facilities, and to accommodate other industries in the region interested in CCS.

Pathways continues to advance its proposed foundational carbon capture and storage project as it works with governments on the necessary co-investment and regulatory certainty needed to proceed. Work is continuing to obtain a carbon sequestration agreement from the government of Alberta to support regulatory applications for the proposed CO2 transportation network and carbon storage hub, which are targeted for submission in the first half of 2024. Project engineering and environmental field programs are on target to meet timelines. Multiple feasibility studies on phase 1 capture facilities, with engineering and design work continue to progress. Stakeholder engagement and consultation are continuing with indigenous and local communities in Northern Alberta related to the Pathways CCS project.

Government support for emissions reductions, and carbon capture, utilization and storage

The government of Canada announced a regulatory framework for an oil and gas sector greenhouse gas emissions cap on Dec. 7, 2023, with plans to publish draft regulations by mid-2024. The framework proposes to cap and cut emissions from the oil and natural gas sector through implementation of a national cap-and-trade system. The oil and natural gas sector has made significant progress in GHG emissions reductions, along with investments in technology and innovation that have been enabled under existing carbon pricing systems. As such, the proposed oil and natural gas sector emissions cap is unnecessary, exceedingly complex and undermines the investor confidence required for large-scale, long-term emission-reduction initiatives.

Canadian Natural is a leader in CCUS and GHG reduction projects, and sees many opportunities to work collaboratively with industry peers and governments to advance investments in CCUS, and to achieve meaningful GHG emissions reductions in support of Canada's climate goals. The government of Canada has proposed an investment tax credit (ITC) for CCUS projects for all sectors across Canada that would offer a refundable ITC of up to 50 per cent on capture equipment, and 37.5 per cent on qualified carbon transportation, storage or usage equipment from 2022 to 2030. In November, 2023, the government of Alberta announced it would provide a 12-per-cent tax credit on eligible capital costs associated with building new CCUS projects. It remains important for governments to work together with industry to ensure that policy and regulatory frameworks deliver the required support to enable CCUS project development.

Canadian Natural will continue to provide input to government on the importance of balancing environmental and economic objectives, along with being able to support Canada's allies with energy security. By working together, industry and governments have the opportunity to help achieve climate goals, meet economic objectives and support Canada's role in energy security.

Two thousand twenty-three year-end reserves

Determination of reserves

For the year ended Dec. 31, 2023, the company retained IQREs, Sproule Associates Ltd., Sproule International Ltd. and GLJ Ltd., to evaluate and review all of the company's proved and proved plus probable reserves. The evaluation and review was conducted and prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook. The reserves disclosure is presented in accordance with National Instrument 51-101 requirements using forecast prices and escalated costs.

The reserves committee of the company's board of directors has met with and carried out independent due diligence procedures with the IQREs as to the company's reserves.

Additional reserves information is disclosed in the company's annual information form.

Summary of company gross reserves

Conference call

Canadian Natural Resources will be issuing its 2023 fourth quarter and year-end earnings results on Thursday, Feb. 29, 2024, before market open.

A conference call will be held at 9 a.m. Mountain Time/11 a.m. Eastern Time on Thursday, Feb. 29, 2024.

Dial-in to the live event:

• North America: 1-800-717-1738;
• International: 001-289-514-5100.

Listen to the audio webcast:

• Access the audio webcast on the home page of the company's website.

Conference call playback:

• North America: 1-888-660-6264;
• International: 001-289-819-1325;
• Passcode: 26260 followed by the pound key.

About Canadian Natural Resources Ltd.

Canadian Natural is a senior crude oil and natural gas production company, with continuing operations in its core areas located in Western Canada, the U.K. portion of the North Sea and offshore Africa.

We seek Safe Harbor.